Better Buy: Bombardier Stock or CAE?

Both Bombardier (TSX:BBD.B) stock and CAE (TSX:CAE) stock have their upsides and downsides, but which is the better buy today?

| More on:
question marks written reminders tickets

Image source: Getty Images

The aerospace and defence industries in Canada are complicated, to say the least. Yet there have been major changes for some of these companies in recent years. Bombardier (TSX:BBD.B), for one, has shifted to a focus on jet aircrafts. CAE (TSX:CAE) remains focused on training and development solutions. This is for aircrafts, certainly, but also through healthcare.

So, with one more diverse, and the other more focused, which is the better buy on the TSX today?

Looking at earnings

First off, let’s look at how CAE stock and BBD stock have both performed recently. For BBD stock, the company reported their third quarter most recently, with a net loss of US$13 million, compared to a net loss of US$161 million the year before. This shows that the company is working towards profitability. Revenue also increased 22% to US$1.7 billion, with continued demand for their business jets. For now, the stock remains focused on reducing debt and improving cash flow. Meanwhile, CAE stock was a fair bit stronger.

CAE stock reported its fourth-quarter results, which exceeded analyst estimates. Net income came to US$120 million, up from US$87 million the year before. Revenue was up 10%, hitting US$986 million as well. This occurred from growth across all its business segments.

Management differentiations

One key I like to take into account when considering which stock to buy is also management. Think about it as the leader of a country. You want someone who has shown to be there during tough times as well as good times and responsible when necessary.

In this case, both companies have their own strengths. BBD stock saw Eric Martel come into the chief executive officer (CEO) role in 2020. He has been credited with turning the company around. His focus on a streamlined operation, reducing debt and improving profitability have already been seen. And that looks likely to continue.

Meanwhile, CAE stock’s Marc Parent has been CEO since 2009. He came along, as you can see, right during the Great Recession. So, he really has been there through thick and thin. Parent is well-respected in the industry and has overseen a period of significant growth and expansion for CAE stock.

Future outlook

Now for the future of both of these companies. Again, both are quite different. It seems that one will likely continue business as usual. However, the other will need to continue making significant strides to achieve profitability.

The latter, of course, will be Bombardier stock. The future looks uncertain in this post-pandemic world, with perhaps falling demand for business jets. The company is still in the process of turning around, and its success will depend on its ability to continue to execute this plan. The business jet market is actually expected to grow over the next few years. So, this could be strong for BBD stock.

CAE stock is a bit more positive. It is an established company with a diverse range of successful businesses. It has a strong track record of growth and benefits from the recovery of commercial aviation and growing demand for pilot training. It could also be seen to latch on to the artificial intelligence wave.

Bottom line

Overall, CAE stock looks like it’s the more stable and profitable of the two companies at the moment. It also holds a brighter near-term outlook. BBD stock should not be ignored, given that it’s turning around and could see high growth in the long term. However, CAE stock simply provides a stable growth model for investors to consider.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Bombardier. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

edit Person using calculator next to charts and graphs
Stocks for Beginners

Where to Invest $7,000 in April 2024

Are you wondering how to deploy the $7,000 TFSA contribution increase in 2024? Here are four high-quality stocks for earning…

Read more »

investment research
Stocks for Beginners

New Investors: 5 Top Canadian Stocks for 2024

Here are five Canadian stocks that might be ideal for a beginner investment portfolio.

Read more »

Dots over the earth connecting the world
Tech Stocks

Hot Takeaway: Concentration in 1 Stock Can Be Just Fine

Concentration in one stock can be alright under the right circumstances, and far better than buying a bunch of poor-performing…

Read more »

tech and analysis
Stocks for Beginners

If You Invested $1,000 in WELL Health in 2019, Here is What It’s Worth Now

WELL stock (TSX:WELL) has fallen pretty dramatically from all-time highs, but what if you bought just before the rise? Should…

Read more »

investment research
Dividend Stocks

5 Easy Ways to Make Extra Money in Canada

These easy methods can help Canadians make money in 2024, and keep it growing throughout the years to come.

Read more »

Solar panels and windmills
Top TSX Stocks

1 High-Yield Dividend Stock You Can Buy and Hold Forever

There are some stocks you can buy and hold forever. Here's one top pick that won't disappoint investors anytime soon.

Read more »

clock time
Stocks for Beginners

This ETF Is Up 16% and Could Be the Best Investment Around

Get access to the global market with the click of a button. This ETF is one of the best ways…

Read more »

ETF chart stocks
Stocks for Beginners

3 Best-Performing Equity ETFs in 2024 Thus Far

If you want big winners from big sectors, consider these three ETFs currently surging already in 2024.

Read more »